Burros_Fries 2024 Franchise FAQ - FDD Ninja

Question 1

In 2022, how many Burros Fries outlets were reacquired from franchisees?

Accepted Answer

| State | Year | Outlets at Start of Year | Outlets Opened | Outlets Reacquired From Franchisees | Outlets Closed | Outlets Sold to Franchisees | Outlets at End of the Year |
|---|---|---|---|---|---|---|---|
| CA | 2021 | 11 | 0 | 0 | 0 | 2 | 9 |
|  | 2022 | 9 | 0 | 1 | 0 | 2 | 8 |
|  | 2023 | 8 | 0 | 0 | 0 | 1 | 7 |
| AZ | 2021 | 0 | 1 | 0 | 0 | 0 | 1 |
|  | 2022 | 1 | 0 | 0 | 0 | 0 | 1 |
|  | 2023 | 1 | 1 | 0 | 0 | 0 | 2 |
| Totals | 2021 | 11 | 1 | 0 | 0 | 2 | 9 |
|  | 2022 | 9 | 0 | 1 | 0 | 2 | 8 |
|  | 2023 | 9 | 1 | 0 | 0 | 1 | 9 |

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 50–53)

Question 2

What was the total number of Burros Fries outlets opened across all locations in 2023?

Accepted Answer

For Fiscal Years ending 2021 through 2023 | State | Year | Outlets at Start of Year | Outlets Opened | Outlets Reacquired From Franchisees | Outlets Closed | Outlets Sold to Franchisees | Outlets at End of the Year | |---|---|---|---|---|---|---|---| | CA | 2021 | 11 | 0 | 0 | 0 | 2 | 9 | | | 2022 | 9 | 0 | 1 | 0 | 2 | 8 | | | 2023 | 8 | 0 | 0 | 0 | 1 | 7 | | AZ | 2021 | 0 | 1 | 0 | 0 | 0 | 1 | | | 2022 | 1 | 0 | 0 | 0 | 0 | 1 | | | 2023 | 1 | 1 | 0 | 0 | 0 | 2 | | Totals | 2021 | 11 | 1 | 0 | 0 | 2 | 9 | | | 2022 | 9 | 0 | 1 | 0 | 2 | 8 | | | 2023 | 9 | 1 | 0 | 0 | 1 | 9 | ^\* The above outlets are owned by our affiliates. ![](_page_51_Picture_0.jpeg) As of December 31, 2023, our seven (7) affiliates operate nine (9) non-franchised Burros & Fries businesses at the locations listed below. The entities shown in the first row are the Affiliates with the stores they own in the rows beneath the first row. | BURROS & FRIES, INC. 4705 Clairmont Drive, Ste. F, San Diego, CA 92117 Phone: 858-490-1095 | BURROS & FRIES C.V., INC. Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 50–53)

Question 3

What was the total number of Burros Fries outlets at the start of 2023?

Accepted Answer

| Outlet Type | Yea r | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2021 | 2 | 4 | +2 |
|  | 2022 | 4 | 3 | -1 |
|  | 2023 | 3 | 4 | +1 |
| Company- Owned* | 2021 | 8 | 8 | 02 |
|  | 2022 | 8 | 9 | +1 |
|  | 2023 | 9 | 9 | 0 |
| Total Outlets | 2021 | 10 | 12 | +2 |
|  | 2022 | 12 | 12 | 02 |
|  | 2023 | 12 | 13 | +1 |

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 50–53)

Question 4

How does the cost of audit expenses for Burros Fries in Item 6 compare to the initial franchise fee in Item 5?

Accepted Answer

| Audit Expenses | Cost of Audit Fees plus interest at 18% per annum (1.5% per month) up to the maximum interest rate allowed by law. | Ten days after receipt of audit report. | Payable to us only if you understate Gross Revenues by 2% or more. We expect the cost to be between $3,500- $6,500 unless your financial records are not well kept. |
|---|---|---|---|

Question 5

What are all the fees a Burros Fries franchisee might pay to the franchisor, considering both the initial fees in Item 5 and the other fees in Item 6?

Accepted Answer

S

The Initial Franchise Fee for a single area Franchise ("Initial Franchise Fee") is \$35,000 for the Franchised Business in a protected area. The protected area of a Franchise is determined once a specific location is identified and approved by us. The Initial Franchise Fee is payment, in part, for expenses incurred by us in furnishing assistance and services to you as set forth in the Franchise Agreement and for costs incurred by us, including general sales and marketing expenses, training, legal, accounting, other professional fees, news bulletins and templates for advertising materials to support your Business, a comprehensive training program at our corporate headquarters or on-site for approximately fourteen (14) days, which includes using the Operations Manual and providing assistance and guidance at your location for either pre-opening or grand opening assistance. You must purchase and maintain an inventory of product, supplies and kitchen equipment from our affiliates or our approved vendors and/or suppliers (as described in Item 8). You will be provided with a list of our approved vendors and/or suppliers during training. You will be provided with a written list of approved products, supplies, kitchen equipment and services you are authorized to use, offer and sell.

The Initial Franchise Fee is paid in a lump sum at the time the Franchise Agreement is signed and is deemed fully earned and nonrefundable upon payment per the terms of the Franchise Agreement as applicable except if an initial franchisee fee deferral is required.

We may decide to offer a program in the future whereby Franchisees can receive a flat referral fee of two thousand five hundred dollars (\$2,500) in cash, services or product credit for referring a third-party franchise prospect to us, who ultimately becomes a franchisee. You are authorized only to present a prospect with our informational brochure and to identify the prospect to our company franchise sales staff. You are not authorized to act as our agent or franchise broker and are not instructed to provide any information to prospects other than our information brochure.

Question 6

If a Burros Fries franchisee is required to buy products, supplies, or kitchen equipment from the franchisor, how will the price and quality compare to other sources?

Accepted Answer

If we require Franchisee to buy from us, products, supplies or kitchen equipment the price and quality will be comparable to similar products, supplies and kitchen equipment from other sources

Source: Item 22 — CONTRACTS (FDD page 53)

Question 7

How does the initial franchise fee for Burros Fries (Item 5) compare to the estimated cost of all other expenses listed in the initial investment table (Item 7)?

Accepted Answer

| Type of Expenditure | Amount Low/High |  | Method of Payment | When Due | To Whom Payment is to be Made |
|---|---|---|---|---|---|
| Initial Franchise Fee | $35,000 | $35,000 | Cash or Acceptable Funds | At signing of the Franchise Agreement. | Franchisor See Item 5 |
| Technology including Computers | $5,000 | $10,000 | Cash or Acceptable Funds (for computers, , modem, routers, sound system, camera surveillance system and telephones.) | Before opening | Payable to our approved vendors See Note 1 |
| Kitchen Equipment, Furniture and Fixtures | $120,000 | $160,000 | Cash or Acceptable Funds. Actual costs will vary based on the size of your facility. | Before opening | Payable to our approved vendors See Note 2 |

Question 8

How does the initial franchise fee for Burros Fries (Item 5) compare to the estimated cost of all other pre-opening expenses, excluding technology, listed in the initial investment table (Item 7)?

Accepted Answer

| Type of Expenditure | Amount Low/High |  | Method of Payment | When Due | To Whom Payment is to be Made |
|---|---|---|---|---|---|
| Initial Franchise Fee | $35,000 | $35,000 | Cash or Acceptable Funds | At signing of the Franchise Agreement. | Franchisor See Item 5 |
| Technology including Computers | $5,000 | $10,000 | Cash or Acceptable Funds (for computers, , modem, routers, sound system, camera surveillance system and telephones.) | Before opening | Payable to our approved vendors See Note 1 |
| Kitchen Equipment, Furniture and Fixtures | $120,000 | $160,000 | Cash or Acceptable Funds. Actual costs will vary based on the size of your facility. | Before opening | Payable to our approved vendors See Note 2 |

Question 9

How does the initial franchise fee for Burros Fries (Item 5) compare to the estimated cost of all pre-opening expenses, including technology and site development, listed in the initial investment table (Item 7)?

Accepted Answer

| Type of Expenditure | Amount Low/High |  | Method of Payment | When Due | To Whom Payment is to be Made |
|---|---|---|---|---|---|
| Initial Franchise Fee | $35,000 | $35,000 | Cash or Acceptable Funds | At signing of the Franchise Agreement. | Franchisor See Item 5 |
| Technology including Computers | $5,000 | $10,000 | Cash or Acceptable Funds (for computers, , modem, routers, sound system, camera surveillance system and telephones.) | Before opening | Payable to our approved vendors See Note 1 |
| Kitchen Equipment, Furniture and Fixtures | $120,000 | $160,000 | Cash or Acceptable Funds. Actual costs will vary based on the size of your facility. | Before opening | Payable to our approved vendors See Note 2 |

Question 10

How does the initial franchise fee for Burros Fries (Item 5) compare to the estimated cost of all pre-opening expenses listed in the initial investment table (Item 7)?

Accepted Answer

| Type of Expenditure | Amount Low/High |  | Method of Payment | When Due | To Whom Payment is to be Made |
|---|---|---|---|---|---|
| Initial Franchise Fee | $35,000 | $35,000 | Cash or Acceptable Funds | At signing of the Franchise Agreement. | Franchisor See Item 5 |
| Technology including Computers | $5,000 | $10,000 | Cash or Acceptable Funds (for computers, , modem, routers, sound system, camera surveillance system and telephones.) | Before opening | Payable to our approved vendors See Note 1 |
| Kitchen Equipment, Furniture and Fixtures | $120,000 | $160,000 | Cash or Acceptable Funds. Actual costs will vary based on the size of your facility. | Before opening | Payable to our approved vendors See Note 2 |

Question 11

How does the initial franchise fee for Burros Fries (Item 5) compare to the estimated cost of all technology and computer-related expenses listed in the initial investment table (Item 7)?

Accepted Answer

| Type of Expenditure | Amount Low/High |  | Method of Payment | When Due | To Whom Payment is to be Made |
|---|---|---|---|---|---|
| Initial Franchise Fee | $35,000 | $35,000 | Cash or Acceptable Funds | At signing of the Franchise Agreement. | Franchisor See Item 5 |
| Technology including Computers | $5,000 | $10,000 | Cash or Acceptable Funds (for computers, , modem, routers, sound system, camera surveillance system and telephones.) | Before opening | Payable to our approved vendors See Note 1 |

Question 12

How does the initial franchise fee for Burros Fries (Item 5) compare to the estimated cost of technology, including computers, as part of the initial investment (Item 7)?

Accepted Answer

| Type of Expenditure | Amount Low/High |  | Method of Payment | When Due | To Whom Payment is to be Made |
|---|---|---|---|---|---|
| Initial Franchise Fee | $35,000 | $35,000 | Cash or Acceptable Funds | At signing of the Franchise Agreement. | Franchisor See Item 5 |
| Technology including Computers | $5,000 | $10,000 | Cash or Acceptable Funds (for computers, , modem, routers, sound system, camera surveillance system and telephones.) | Before opening | Payable to our approved vendors See Note 1 |

Question 13

How does the initial franchise fee for Burros Fries (Item 5) compare to the estimated cost of technology, including the sound system and camera surveillance system, as part of the initial investment (Item 7)?

Accepted Answer

| Type of Expenditure | Amount Low/High |  | Method of Payment | When Due | To Whom Payment is to be Made |
|---|---|---|---|---|---|
| Initial Franchise Fee | $35,000 | $35,000 | Cash or Acceptable Funds | At signing of the Franchise Agreement. | Franchisor See Item 5 |
| Technology including Computers | $5,000 | $10,000 | Cash or Acceptable Funds (for computers, , modem, routers, sound system, camera surveillance system and telephones.) | Before opening | Payable to our approved vendors See Note 1 |

Question 14

How does the initial franchise fee for Burros Fries in Item 5 compare to the total estimated initial investment in Item 7?

Accepted Answer

| Type of Expenditure | Amount Low/High |  | Method of Payment | When Due | To Whom Payment is to be Made |
|---|---|---|---|---|---|
| Initial Franchise Fee | $35,000 | $35,000 | Cash or Acceptable Funds | At signing of the Franchise Agreement. | Franchisor See Item 5 |
| Technology including Computers | $5,000 | $10,000 | Cash or Acceptable Funds (for computers, , modem, routers, sound system, camera surveillance system and telephones.) | Before opening | Payable to our approved vendors See Note 1 |
| Kitchen Equipment, Furniture and Fixtures | $120,000 | $160,000 | Cash or Acceptable Funds. Actual costs will vary based on the size of your facility. | Before opening | Payable to our approved vendors See Note 2 |

Question 15

What obligations does a Burros Fries franchisee have related to site selection (Item 9) and what assistance does Burros Fries provide for site selection (Item 11)?

Accepted Answer

Franchisee has the responsibility for selecting a site for its Business. If Franchisee is leasing a space for the Business, we must review and approve the lease prior to the lease being signed. If the Franchisee is purchasing property, we must review and approve the lease or purchase contract prior to it being signed. We will review and approve or disapprove the location of the Business and will not

Franchisee assumes all costs, liability, expense, and responsibility for locating, obtaining and developing a site for the Franchise Business to be established under the Franchise Agreement and for equipping the Business at such premises. A typical Burros & Fries Business has approximately 2,500- 3,000 square feet of space. The space must be enclosed and separate from other businesses with its own locking door. Franchisee may buy or lease the required real property and improvements from any source and on terms approved by us in writing. Franchisee may not sign a lease (or a contract to purchase the premises, if applicable) for the Business until Franchisee has obtained our written approval. Franchisee must not invest any monies for a site in which Franchisee wishes to open a Business until Franchisee has obtained our written approval for the site which will be made by email or any other form of written communication. On the execution of any lease for the Franchise Business, Franchisee will deliver to us a copy of the executed lease and an option to assume the lease executed by the lessor in favor of us in a form acceptable to us. All improvements to the Business must be approved by us.

**FRANCHISEE ACKNOWLEDGES THAT OUR ACCEPTANCE OF A PROSPECTIVE SITE AND THE RENDERING OF ASSISTANCE IN THE SELECTION OF A SITE DOES NOT CONSTITUTE A REPRESENTATION, PROMISE, WARRANTY, OR GUARANTEE BY US THAT A BURROS & FRIES FRANCHISE OPERATED AT THAT SITE WILL BE PROFITABLE OR OTHERWISE SUCCESSFUL.**

| ARTICLE 3 | Build-Out, Design & Furnishing 3 | (10 pages) |

Question 16

What is the relationship between the initial franchise fee for Burros Fries in Item 5 and the technology costs listed in the initial investment table in Item 7?

Accepted Answer

| Type of Expenditure | Amount Low/High |  | Method of Payment | When Due | To Whom Payment is to be Made |
|---|---|---|---|---|---|
| Initial Franchise Fee | $35,000 | $35,000 | Cash or Acceptable Funds | At signing of the Franchise Agreement. | Franchisor See Item 5 |
| Technology including Computers | $5,000 | $10,000 | Cash or Acceptable Funds (for computers, , modem, routers, sound system, camera surveillance system and telephones.) | Before opening | Payable to our approved vendors See Note 1 |

Question 17

Will the terms of the renewal agreement for a Burros Fries franchise be the same as the original agreement?

Accepted Answer

anchisee's web pages and any other Websites and cause any advertisements to be removed, if and as requested by us.

## **7. TERM AND RENEWAL OF AGREEMENT**

## A. Term

The Franchise herein granted for a Burros & Fries Business, shall be for a term of ten (10) years from the date of execution and acceptance (the "Effective Date") of this Agreement by us and subject to earlier termination as herein provided. We reserve the right, with your approval, to change the term to match the premise's lease.

## B. Renewal

Franchisee shall have the option to renew this Agreement for up to two (2) additional terms of ten (10) years each, provided we are still offering franchises at that time, and further subject to the following conditions, all of which must be met prior to renewal:

- 1. Franchisee shall give us written notice of its election to renew not more that twelve (12) months and not less than six (6) months prior to the end of the then current term. We will respond to Franchisee's written notice to renew no later than thirty (30) days after receipt of such notice by email or any other form of written communication;
- 2.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 18

Is the 18% per annum interest rate on audit expenses for a Burros Fries franchise subject to legal limits?

Accepted Answer

|                                                 |                                                                                                                    | -                                                |                                                                                                                                                                      |
|-------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Audit Expenses | Cost of Audit Fees plus interest at 18% per annum (1.5% per month) up to the maximum interest rate allowed by law. | Ten days after receipt of audit report. | Payable to us only if you understate Gross Revenues by 2% or more. We expect the cost to be between \$3,500-\$6,500 unless your financial records are not well kept.

Source: Item 6 — OTHER FEES (FDD pages 12–16)

Question 19

Is Burros Fries' acceptance of a location conditioned upon their determination that the site is suitable based upon criteria they establish periodically?

Accepted Answer

However, the acceptance of a location and entering it on your Franchise Agreement by us is conditioned upon our determination, in our reasonable judgment, that: - (i) the site which you have submitted is a suitable site based upon criteria we establish periodically; and - (ii) you and your Owners are in compliance with the Franchise Agreement. Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 27–38)

Question 20

Is Burros Fries' acceptance of a location conditioned upon the franchisee and their Owners being in compliance with the Franchise Agreement?

Accepted Answer

However, the acceptance of a location and entering it on your Franchise Agreement by us is conditioned upon our determination, in our reasonable judgment, that: - (i) the site which you have submitted is a suitable site based upon criteria we establish periodically; and - (ii) you and your Owners are in compliance with the Franchise Agreement. Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 27–38)

Question 21

According to the Collateral Assignment of Lease for Burros Fries, what happens if the Franchisee's rights are cancelled?

Accepted Answer

Franchisee agrees to take whatever actions are necessary to accomplish such assignment and will, when you sign this Agreement, also sign the Collateral Assignment of Lease attached as Schedule 6. If Franchisee loses lease rights to the site in connection with any bankruptcy, the lessor will, on our request, enter into a new lease with us on essentially the same terms as the terminated lease;

Source: Item 22 — CONTRACTS (FDD page 53)

Question 22

According to the Collateral Assignment of Lease for Burros Fries, what happens if the Franchisee's rights expire?

Accepted Answer

Franchisee agrees to take whatever actions are necessary to accomplish such assignment and will, when you sign this Agreement, also sign the Collateral Assignment of Lease attached as Schedule 6. If Franchisee loses lease rights to the site in connection with any bankruptcy, the lessor will, on our request, enter into a new lease with us on essentially the same terms as the terminated lease;

Source: Item 22 — CONTRACTS (FDD page 53)

Question 23

According to the Collateral Assignment of Lease for Burros Fries, what happens if the Franchisee's rights are rescinded?

Accepted Answer

Franchisee agrees to take whatever actions are necessary to accomplish such assignment and will, when you sign this Agreement, also sign the Collateral Assignment of Lease attached as Schedule 6. If Franchisee loses lease rights to the site in connection with any bankruptcy, the lessor will, on our request, enter into a new lease with us on essentially the same terms as the terminated lease;

Source: Item 22 — CONTRACTS (FDD page 53)

Question 24

According to the Burros Fries FDD, what is the potential consequence of a franchisee's contact information being included in the Franchise Disclosure Document?

Accepted Answer

Franchisee acknowledges that its contact information will be included in our Franchise Disclosure Document in the future, as required by state agencies and the Federal Trade Commission, and that such inclusion may result in prospective franchisees contacting Franchisee.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 25

According to the Burros Fries franchise agreement, what happens if the franchisee has existing franchise agreements related to the pre-existing business?

Accepted Answer

Franchisee and its Owners and/or Principals will not directly or indirectly at any time or in any manner (except with respect to other Burros & Fries Business that Franchisee or its Principals own and operate) identify itself or any business as a current or former Burros & Fries business owner or as one of our franchise owners; use any Mark, any colorable imitation of a Mark, or other indicia of a Burros & Fries Business in any manner or for any purpose; or utilize for any purpose any trade name, trade or service mark or other commercial symbol that suggest or indicates a connection or association with us as described in Sections 24.A and 24.C of this Agreement.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 26

Are the audit expenses for a Burros Fries franchise only payable if gross revenues are understated by a certain percentage?

Accepted Answer

| Audit Expenses | Cost of Audit Fees plus interest at 18% per annum (1.5% per month) up to the maximum interest rate allowed by law. | Ten days after receipt of audit report. | Payable to us only if you understate Gross Revenues by 2% or more. We expect the cost to be between $3,500- $6,500 unless your financial records are not well kept. |

Source: Item 6 — OTHER FEES (FDD pages 12–16)

Question 27

Besides the $10,000 flat fee, what other fees might a Burros Fries franchisee have to pay when transferring if the transferee was in the franchisor's lead database?

Accepted Answer

owners if an Entity, managers, directors or officers) must not operate a franchise, license another or operate businesses offering products and services similar to those offered by the Franchise;
- 4. We shall charge a flat transfer fee of ten thousand dollars (\$10,000) to Franchisee when Franchisee transfers part or the entire Franchise Business upon our written consent (defined as all other transfers). The term "flat transfer fee" means that Franchisee shall pay this amount regardless of whether our actual cost to process the transfer is higher or lower than such amount. The flat transfer fee will include, but not be limited to, reasonable attorney's fees actually incurred, the cost of investigating the transferee and our administrative expenses (including employee salaries, sales staff commissions, travel costs, out of pocket costs properly attributable to the transfer). In addition, if the transferee was already in our lead database at the time of first contact between Franchisee and the

![](_page_120_Picture_0.jpeg)

transferee, we may require Franchisee to pay a referral fee (which amount will be customary for the transaction), in addition to the flat \$10,000 fee described above, plus the amount of any broker fees that we are responsible for paying to third parties (does not include our employees);

- 5.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 28

Besides holidays, what are the conditions under which a Burros Fries franchisee may operate for a lesser period than required?

Accepted Answer

Your business must stay open seven (7) days a week and at least ten and a half (10.5) hours per day, except for holidays (as specified in the Operations Manual). The only exception to the above is if Franchisee is given written permission by us to operate at a lesser period; or if the hours of operation for the Business are required by the lease of the premises on which the Business is operated.

Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 44–45)

Question 29

Can Burros Fries change the standards and specifications for the franchise?

Accepted Answer

y vendor or supplier other than us. You are required to adhere to the standards and specifications established periodically by us with respect to your Burros & Fries Business, all menu and retail items offered, recipes, food preparation, cleanliness standards, operational procedures, advertising, vendors, products and services to be offered through your Franchise and other items for the operation of your Business. You must operate in strict conformity with the methods, standards and specifications that we prescribe in the Operations Manual or otherwise in writing. You must maintain in sufficient supply, sell and use at all times only the products, supplies, kitchen equipment and services that meet our standards and specifications. We may change our standards and specifications, as a result of experience or changes in the marketplace and we will issue such changes to all franchisees. We base our approval of vendors and suppliers on our discretionary determination of demand, relevance to the System, price, value, quality, reliability, accuracy of product claims, safety, warranty, prompt attention to complaints, financial stability, litigation against supplier, recall history, reputation, frequency of delivery, appearance and contributions or other benefits to us and/or any marketing fund. Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 21–25)

Question 30

Does the Collateral Assignment of Lease for Burros Fries specify that the Franchisor has no obligations of any kind arising from the assignment until the Franchisor takes possession?

Accepted Answer

| Franchisee:                                                                                                                                                                                                                                                                                                           |                         |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|
| Franchisor: Burros & Fries Franchise, Inc., a California corporation                                                                                                                                                                                                                                                  |                         |
| Date of this Collateral Assignment of Lease | , 20 |
| (the "Assignment"): |  |
| The Franchisee, to effect various provisions of that certain Franchise Agreement dated by and between Franchisee and Franchisor (the "Franchise Agreement"), hereby collaterally Franchisor (subject to the terms and conditions below) all of Franchisee's right, title and interest in, to and | , 20 , assigns to |
| under that certain lease (the "Lease") | 20, |
| dated |  |
| between Franchisee and, ("Landlord"), for                                                                                                                                                                                                                                                                             |                         |
| that property commonly known as: (the "Premises"),                                                                                                                                                                                                                                                                    |                         |
| a copy of which Lease is attached to this |  |
| Assignment. |  |

NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, the sum of Ten Dollars (\$10.00) and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, and notwithstanding anything in the Lease to the contrary, it is hereby agreed as follows:

No material modification or amendment of the Lease shall occur or be effective without the prior written consent of Franchisor.

Except as provided in the Franchise Agreement, the Franchisor will not take possession of the Premises under this Assignment until and unless there is a default by Franchisee under the Lease or a termination, cancellation, rescission or expiration of the Franchisee's rights, or a default by Franchisee, under the Franchise Agreement. In such event(s), the Franchisor (or its designee) may (but has no obligation to) take possession of the Premises and assume the Franchisee's rights under the Lease, and, in such event, Franchisee will have no further right, title or interest in or under the Lease or to the Premises, all such rights thereby passing to the Franchisor or its designee, without the Landlord's further consent. The Franchisee will fully cooperate therewith, and do all acts necessary or appropriate thereto. The Franchisor will have no liabilities or obligations of any kind arising from, or in connection with, this Assignment, the Lease, the Premises or otherwise until and unless the Franchisor takes possession of the Premises pursuant to this Assignment and, in any event, the Franchisor will only be responsible for those obligations accruing with respect to the Lease after the date of such express assumption. Upon taking possession of the Premises, Fra

Source: Item 22 — CONTRACTS (FDD page 53)

Question 31

Does the Collateral Assignment of Lease for Burros Fries state that the Franchisee will have no further right, title or interest in or under the Lease or to the Premises if the Franchisor takes possession?

Accepted Answer

| Franchisee:                                                                                                                                                                                                                                                                                                           |                         |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|
| Franchisor: Burros & Fries Franchise, Inc., a California corporation                                                                                                                                                                                                                                                  |                         |
| Date of this Collateral Assignment of Lease | , 20 |
| (the "Assignment"): |  |
| The Franchisee, to effect various provisions of that certain Franchise Agreement dated by and between Franchisee and Franchisor (the "Franchise Agreement"), hereby collaterally Franchisor (subject to the terms and conditions below) all of Franchisee's right, title and interest in, to and | , 20 , assigns to |
| under that certain lease (the "Lease") | 20, |
| dated |  |
| between Franchisee and, ("Landlord"), for                                                                                                                                                                                                                                                                             |                         |
| that property commonly known as: (the "Premises"),                                                                                                                                                                                                                                                                    |                         |
| a copy of which Lease is attached to this |  |
| Assignment. |  |

NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, the sum of Ten Dollars (\$10.00) and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, and notwithstanding anything in the Lease to the contrary, it is hereby agreed as follows:

No material modification or amendment of the Lease shall occur or be effective without the prior written consent of Franchisor.

Except as provided in the Franchise Agreement, the Franchisor will not take possession of the Premises under this Assignment until and unless there is a default by Franchisee under the Lease or a termination, cancellation, rescission or expiration of the Franchisee's rights, or a default by Franchisee, under the Franchise Agreement. In such event(s), the Franchisor (or its designee) may (but has no obligation to) take possession of the Premises and assume the Franchisee's rights under the Lease, and, in such event, Franchisee will have no further right, title or interest in or under the Lease or to the Premises, all such rights thereby passing to the Franchisor or its designee, without the Landlord's further consent. The Franchisee will fully cooperate therewith, and do all acts necessary or appropriate thereto. The Franchisor will have no liabilities or obligations of any kind arising from, or in connection with, this Assignment, the Lease, the Premises or otherwise until and unless the Franchisor takes possession of the Premises pursuant to this Assignment and, in any event, the Franchisor will only be responsible for those obligations accruing with respect to the Lease after the date of such express assumption. Upon taking possession of the Premises, Fra

Source: Item 22 — CONTRACTS (FDD page 53)

Question 32

Does the Collateral Assignment of Lease for Burros Fries state that the Franchisor will only be responsible for obligations accruing with respect to the Lease after the date of express assumption?

Accepted Answer

Provide us with a right to take assignment and possession of the Business, without the lessor's consent or any additional consideration. If we exercise this right and

![](_page_94_Picture_0.jpeg)

Franchisee is in good standing, we'll sign a sublease with Franchisee for the same rent Franchisee is paying. In any case, we won't have any liability for any obligations incurred prior to our occupancy.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 33

Does the Collateral Assignment of Lease for Burros Fries state that the Franchisor will not take possession of the Premises until there is a default by Franchisee under the Lease?

Accepted Answer

Except as provided in the Franchise Agreement, the Franchisor will not take possession of the Premises under this Assignment until and unless there is a default by Franchisee under the Lease or a termination, cancellation, rescission or expiration of the Franchisee's rights, or a default by Franchisee, under the Franchise Agreement. In such event(s), the Franchisor (or its designee) may (but has no obligation to) take possession of the Premises and assume the Franchisee's rights under the Lease, and, in such event, Franchisee will have no further right, title or interest in or under the Lease or to the Premises, all such rights thereby passing to the Franchisor or its designee, without the Landlord's further consent. The Franchisee will fully cooperate therewith, and do all acts necessary or appropriate thereto. The Franchisor will have no liabilities or obligations of any kind arising from, or in connection with, this Assignment, the Lease, the Premises or otherwise until and unless the Franchisor takes possession of the Premises pursuant to this Assignment and, in any event, the Franchisor will only be responsible for those obligations accruing with respect to the Lease after the date of such express assumption. Upon taking possession of the Premises, Franchisor shall be obligated from that date forward to perform all of the duties and obligations of Franchisee under the Lease. Franchisor shall notify Landlord, in writing, within five (5) days of taking possession of the Premises.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 34

Does the Collateral Assignment of Lease for Burros Fries state that the Franchisor will not take possession of the Premises until there is a default by Franchisee under the Franchise Agreement?

Accepted Answer

| Franchisee:                                                                                                                                                                                                                                                                                                           |                         |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|
| Franchisor: Burros & Fries Franchise, Inc., a California corporation                                                                                                                                                                                                                                                  |                         |
| Date of this Collateral Assignment of Lease | , 20 |
| (the "Assignment"): |  |
| The Franchisee, to effect various provisions of that certain Franchise Agreement dated by and between Franchisee and Franchisor (the "Franchise Agreement"), hereby collaterally Franchisor (subject to the terms and conditions below) all of Franchisee's right, title and interest in, to and | , 20 , assigns to |
| under that certain lease (the "Lease") | 20, |
| dated |  |
| between Franchisee and, ("Landlord"), for                                                                                                                                                                                                                                                                             |                         |
| that property commonly known as: (the "Premises"),                                                                                                                                                                                                                                                                    |                         |
| a copy of which Lease is attached to this |  |
| Assignment. |  |

NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, the sum of Ten Dollars (\$10.00) and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, and notwithstanding anything in the Lease to the contrary, it is hereby agreed as follows:

No material modification or amendment of the Lease shall occur or be effective without the prior written consent of Franchisor.

Except as provided in the Franchise Agreement, the Franchisor will not take possession of the Premises under this Assignment until and unless there is a default by Franchisee under the Lease or a termination, cancellation, rescission or expiration of the Franchisee's rights, or a default by Franchisee, under the Franchise Agreement. In such event(s), the Franchisor (or its designee) may (but has no obligation to) take possession of the Premises and assume the Franchisee's rights under the Lease, and, in such event, Franchisee will have no further right, title or interest in or under the Lease or to the Premises, all such rights thereby passing to the Franchisor or its designee, without the Landlord's further consent. The Franchisee will fully cooperate therewith, and do all acts necessary or appropriate thereto. The Franchisor will have no liabilities or obligations of any kind arising from, or in connection with, this Assignment, the Lease, the Premises or otherwise until and unless the Franchisor takes possession of the Premises pursuant to this Assignment and, in any event, the Franchisor will only be responsible for those obligations accruing with respect to the Lease after the date of such express assumption. Upon taking possession of the Premises, Fra

Source: Item 22 — CONTRACTS (FDD page 53)

Question 35

Does the Confidentiality and Non-Compete Agreement for Burros Fries depend on the execution of any other agreements?

Accepted Answer

trolled by or under common control with Franchisee. The initial Franchisee's Principals shall be listed on Schedule 7 of this Agreement.

## C. Franchisee Will Not Compete Against Franchisor

Franchisee specifically acknowledges that, pursuant to this Agreement, Franchisee will receive valuable specialized training, our Confidential Information and our System.

Franchisee agrees that, except as otherwise approved in writing by us, Franchisee shall not, during the term of this Agreement and for a period of two (2) years from the date of (i) a transfer permitted under this Agreement; (ii) the expiration or termination of this Agreement (regardless of the cause for termination); or (iii) a final order of a duly authorized arbitrator, panel of arbitrators, or a court of competent jurisdiction (after all appeals have been taken) with respect to any of the foregoing or with respect to the enforcement of this Section 19.C, either directly or indirectly for itself, or through, on behalf of, or in conjunction with, any person, persons, or legal entity, own, maintain, operate, engage in, be employed by, or have any interest in any business using any aspect of the System, the overall Burros & Fries business concept, with similar Products and/or Services within a ten (10) mile radius of the Accepted Location designated hereunder, or within a ten (10) mile radius of any other System franchise or company-owned business in existence or planned as of the time of termination or expiration of this Agreement as identified in the Franchise Disclosure Document in effect as of the date of expiration or termination of this Agreement.

The unenforceability of all or part of this covenant not to compete in any jurisdiction will not affect the enforceability of this covenant not to compete in any other jurisdictions, or the enforceability of the remainder of this Agreement.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 36

Does the Confidentiality and Non-Compete Agreement for Burros Fries require both the franchisor and franchisee to sign?

Accepted Answer

## FRANCHISE AGREEMENT

## *PARTIES*

**THIS FRANCHISE AGREEMENT** ("Agreement") is made by and between Burros & Fries Franchise, Inc, a California corporation, hereinafter sometimes referred to as "Burros & Fries" or "Franchisor" and that party or parties described as the Franchisee in this Agreement and on the signature line, hereinafter known as "you" or "Franchisee." If the Franchisee is a corporation or limited liability company, partnership or other entity, certain provisions of this Agreement also apply to your shareholders, members, partners or owners. Any such entity may be referred to as an "Entity" and those who own the Entity may be referred to as "Owners." For ease of reference, Burros & Fries, Inc., will also be referred to as "we," "us

Source: Item 22 — CONTRACTS (FDD page 53)

Question 37

Does the Confidentiality and Non-Compete Agreement for Burros Fries specify any conditions under which the agreement can be terminated?

Accepted Answer

Against Franchisor

Franchisee specifically acknowledges that, pursuant to this Agreement, Franchisee will receive valuable specialized training, our Confidential Information and our System.

Franchisee agrees that, except as otherwise approved in writing by us, Franchisee shall not, during the term of this Agreement and for a period of two (2) years from the date of (i) a transfer permitted under this Agreement; (ii) the expiration or termination of this Agreement (regardless of the cause for termination); or (iii) a final order of a duly authorized arbitrator, panel of arbitrators, or a court of competent jurisdiction (after all appeals have been taken) with respect to any of the foregoing or with respect to the enforcement of this Section 19.C, either directly or indirectly for itself, or through, on behalf of, or in conjunction with, any person, persons, or legal entity, own, maintain, operate, engage in, be employed by, or have any interest in any business using any aspect of the System, the overall Burros & Fries business concept, with similar Products and/or Services within a ten (10) mile radius of the Accepted Location designated hereunder, or within a ten (10) mile radius of any other System franchise or company-owned business in existence or planned as of the time of termination or expiration of this Agreement as identified in the Franchise Disclosure Document in effect as of the date of expiration or termination of this Agreement.

The unenforceability of all or part of this covenant not to compete in any jurisdiction will not affect the enforceability of this covenant not to compete in any other jurisdictions, or the enforceability of the remainder of this Agreement. This covenant not to compete is given in part in specific consideration for access to trade secrets provided as a part of our training or ongoing support programs. In any jurisdiction in which the covenant contained in this Section 19 or any part of it is deemed not enforceable in whole or in part, Franchisee hereby grants us an option to purchase Franchisee's Business on expiration or termination of this Agreement. In such case, we may exercise this option by giving thirty (30) days' written

![](_page_110_Picture_0.jpeg)

notice to Franchisee (Sections 22.C and 22.E). On termination or expiration, Franchisee will deliver to us a list of these Assets (as described in Section 24.G) and their cost as well as receipts evidencing their cost. Franchisee must relinquish possession on receipt of payment, but no later than ninety (90) days after expiration or termination. Franchisee's other post termination obligations under this Agreement and by law remain in effect on termination or expiration of this Agreement.

## D. Exception to Covenant Not to Compete

Section 19.C hereof shall not apply to ownership by Franchisee or any of its Owners of less than a five percent (5%) beneficial interest in the outstanding equity securities of any Publicly-Held Corporation. As used in this Agreement the term "Publicly-Held Corporation" shall be deemed to refer to a corporation which has securities that has been registered under the Federal Securities Exchange Act of 1934.

## E. Franchisee Will Not Divert Business

During the term of this Agreement and for a period of two (2) years following the expiration or termination of this Agreement, Franchisee agrees that it will not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, persons, or legal entity:

- 1.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 38

Does the Confidentiality and Non-Compete Agreement for Burros Fries specify any financial thresholds related to the enforcement of the agreement?

Accepted Answer

emporary and/or permanent injunction and a decree for the specific performance of the terms of this Agreement, without the necessity of showing actual or threatened harm and without being required to furnish a bond or other security.
- 12. You agree to pay all expenses (including court costs and reasonable legal fees) incurred by us and You in enforcing this Agreement.
- 13. Any failure by us or You to object or to take action with respect to any breach of this Agreement by You shall not operate or be construed as a waiver of or consent to that breach or any later breach by You.
- 14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF CALIFORNIA. THE PARTIES AGREE THAT ANY ACTION BROUGHT BY ANY PARTY AGAINST ANOTHER IN ANY COURT, WHETHER FEDERAL OR STATE, SHALL BE BROUGHT IN CALIFORNIA IN THE JUDICIAL DISTRICT IN WHICH WE HAVE OUR PRINCIPAL PLACE OF BUSINESS;

Source: Item 22 — CONTRACTS (FDD page 53)

Question 39

Does the Confidentiality and Non-Compete Agreement for Burros Fries specify any geographic limitations on the confidentiality provisions?

Accepted Answer

Neither Franchisee nor any of its Owners if you are an Entity, officers, directors, agents, employees or independent contractors, except as required in the performance of the duties contemplated by this Agreement, may disclose or use at any time, whether during the term of this Agreement or thereafter, any confidential and proprietary information disclosed to or known by Franchisee or any such person as a result of this Agreement. Such information, includes, but shall not be limited to our confidential matters and trade secrets such as our: strategies for site acquisition, build-out, design and décor specifications; distinctive Products, Services, proprietary recipes, sauces and home-made ice cream; specific food preparation techniques, methods, procedures including standards; specifications and purchasing strategies for all products, supplies and kitchen equipment; inventory management systems, vendors and supplier relationships, cost and pricing strategies, retail center setup, merchandising strategies, procedures for cleanliness, safety, sanitation and quality control; software, service methods and techniques, operational procedures, service standards, employee hiring, training and retention programs; menus, photographs of food, sales, advertising, marketing and promotional materials; forms, contracts, record keeping, reporting procedures and accounting methods, proprietary information conceived, originated, discovered, or developed by Franchisee or by any employee of Franchisee which is not generally known in the trade or industry about our Products or Services, including information relating to discoveries, ideas, production, purchasing, accounting, engineering, website development and design, marketing, merchandising or selling of Products and Services (collectively referred to as "Confidential Information" and further defined in Section 16.A of this Agreement).

Franchisee further acknowledges that the Confidential Information was unknown to Franchisee prior to negotiation for and execution of this Agreement and that the unique and novel combination of "know how," methods, processes and techniques developed by us and licensed to Franchisee for the operation of a Burros & Fries Business are particular to the food service industry conducted by your Business. Franchisee agrees to take all steps necessary, at Franchisee's expense, to protect the Confidential Information and shall not release it to any person that does not have a need to know, including employees,

![](_page_76_Picture_0.jpeg)

Source: Item 22 — CONTRACTS (FDD page 53)

Question 40

Does the Confidentiality and Non-Compete Agreement for Burros Fries specify any geographic limitations on the non-solicitation provisions?

Accepted Answer

Franchisee agrees that, except as otherwise approved in writing by us, Franchisee shall not, during the term of this Agreement and for a period of two (2) years from the date of (i) a transfer permitted under this Agreement; (ii) the expiration or termination of this Agreement (regardless of the cause for termination); or (iii) a final order of a duly authorized arbitrator, panel of arbitrators, or a court of competent jurisdiction (after all appeals have been taken) with respect to any of the foregoing or with respect to the enforcement of this Section 19.C, either directly or indirectly for itself, or through, on behalf of, or in conjunction with, any person, persons, or legal entity, own, maintain, operate, engage in, be employed by, or have any interest in any business using any aspect of the System, the overall Burros & Fries business concept, with similar Products and/or Services within a ten (10) mile radius of the Accepted Location designated hereunder, or within a ten (10) mile radius of any other System franchise or company-owned business in existence or planned as of the time of termination or expiration of this Agreement as identified in the Franchise Disclosure Document in effect as of the date of expiration or termination of this Agreement.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 41

What is the consequence for a Burros Fries franchisee if they lease equipment from unapproved vendors without written approval?

Accepted Answer

Failure of Franchisee to purchase such items from us, our affiliates or approved vendors and/or supplies and use such unapproved items in the operation of its Business may result in termination of this Agreement as specified in Section 23.C of this Agreement.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 42

What is the consequence for a Burros Fries franchisee if they lease products from unapproved vendors without written approval?

Accepted Answer

Failure of Franchisee to purchase such items from us, our affiliates or approved vendors and/or supplies and use such unapproved items in the operation of its Business may result in termination of this Agreement as specified in Section 23.C of this Agreement.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 43

What is the consequence for a Burros Fries franchisee if they purchase products from unapproved vendors after receiving a written disapproval?

Accepted Answer

Failure of Franchisee to purchase such items from us, our affiliates or approved vendors and/or supplies and use such unapproved items in the operation of its Business may result in termination of this Agreement as specified in Section 23.C of this Agreement.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 44

What is the consequence for a Burros Fries franchisee if they purchase supplies from unapproved vendors after receiving a written disapproval?

Accepted Answer

Failure of Franchisee to purchase such items from us, our affiliates or approved vendors and/or supplies and use such unapproved items in the operation of its Business may result in termination of this Agreement as specified in Section 23.C of this Agreement.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 45

What is the consequence for a Burros Fries franchisee if they use services from unapproved vendors without written approval?

Accepted Answer

Failure of Franchisee to purchase such items from us, our affiliates or approved vendors and/or supplies and use such unapproved items in the operation of its Business may result in termination of this Agreement as specified in Section 23.C of this Agreement.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 46

What is the consequence if a Burros Fries franchisee fails to secure a lease within eighteen months of the Franchise Agreement's execution?

Accepted Answer

The Franchisee shall maintain the Business in accordance with the provisions and requirements of Section 12 hereof, and must secure a lease that has been approved by us (as described in Section 12.S) within eighteen (18) months of the execution of this Franchise Agreement ("Effective Date") and open the Business for operation (the "Opening") within twenty-four (24) months from the date of execution of this Franchise Agreement. Upon Franchisee's failure to meet either of the above requirements; then we may, at our sole discretion, terminate the Franchise and this Agreement and retain all fees paid by Franchisee, without breach of this Agreement by us as specified in Section 23.C. The Opening requires that Franchisee has qualified for and has obtained all necessary licenses and permits needed to sell Products and perform Services. We may, in our discretion, grant Franchisee one sixty (60) day extension past the allotted time within which to secure a lease and/or open the Business.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 47

What is the dependency between the Franchise Agreement and the option to provide products/services to National Accounts for Burros Fries?

Accepted Answer

- d) If Franchisee elects not to provide Products or perform Services to a National Account in conformity with the terms and conditions of the National Account bid or contract, orfails to make an election within the time specified by us, of being offered the opportunity by us, we shall have the right, exercisable in our sole discretion, to:

- i.

Provide directly or through any other affiliate or franchisee utilizing our Marks, Products and/or Services to a National Account location(s) located anywhere on the terms and conditions contained in the National Account bid or contract; and/or

- ii.

Contract with another party to provide Products and/or perform Services to the National Account location(s) located anywhere on the terms and conditions contained in the National Account bid or contract between us and the National Account, utilizing our Marks or any trademarks, service marks or trade names.

- e) Neither the direct provision by us (or a franchisee, affiliate or agent of ours) of Products or Services to National Accounts as authorized in (i) above, nor if we contract with another party to provide such Products and perform Services as authorized in (ii) above, shall constitute a violation of Section 6 of this Agreement relating to the Franchisee's Territory, even if such Products and/or Services are offered or performed from a location within the Territory or Non-Traditional Location.

Franchisee disclaims any compensation for Products provided or Services performed by others pursuant to this section.

![](_page_66_Picture_0.jpeg)

If Franchisee is provided a Territory, Franchisee's rights in the Territory are exactly (and only) as expressly set forth in this Section 6. Except as expressly provided in this Agreement, Franchisee has no right to exclude, control or impose conditions on the location, operation, or otherwise of present or future Burros & Fries (or any other brand) units or distribution channels of any type, franchised or companyowned, regardless of their location or proximity to the Business and whether or not they sell Products or provide Services within that area. Franchisee does not have any rights with respect to other and/or related businesses, products and/or services, in which we or any of affiliates may be involved, now or in the future.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 48

To what extent do the modifications in the State Law Addenda supersede portions of the Franchise Agreement for Burros Fries?

Accepted Answer

|       | The following modifications are to the Burros & Fries Franchise, Inc., Disclosure Document and will         |
|-------|-------------------------------------------------------------------------------------------------------------|
|       | supersede, to the extent then required by applicable state law, certain portions of the Franchise Agreement |
| dated | , 20                                                                                                        |

Source: Item 22 — CONTRACTS (FDD page 53)

Question 49

Can the form of the continuing guaranty agreement for Burros Fries be amended or modified?

Accepted Answer

- 4. Each Guarantor consents and agrees that:
  - (a) Liability under this Guaranty is joint and several with any other guarantor and the Franchisee;
  - (b) Each will render any payment or performance required under this Guaranty on demand, if Franchisee fails or refuses punctually to do so;
  - (c) Each will individually comply with the provisions and all subsections of the Agreements and associated documents;
  - (d) Liability is not contingent or conditioned on Franchisor's pursuit of any remedies against Franchisee or any other persons; and
  - (e) Liability is not affected by any extension of time, acceptance or part performance, release of claims, or other compromise that Franchisor may grant Franchisee or other person, including the acceptance of any partial payment or performance, or the compromise or release of any claims, none of which shall in any way modify or amend this Guaranty, which shall be continuing and irrevocable during the term of the Agreement.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 50

Does the Burros Fries Franchise Agreement contain a covenant not to compete that extends beyond the termination of the franchise, and is this enforceable under California law?

Accepted Answer

Franchisee agrees that, except as otherwise approved in writing by us, Franchisee shall not, during the term of this Agreement and for a period of two (2) years from the date of (i) a transfer permitted under this Agreement; (ii) the expiration or termination of this Agreement (regardless of the cause for termination); or (iii) a final order of a duly authorized arbitrator, panel of arbitrators, or a court of competent jurisdiction (after all appeals have been taken) with respect to any of the foregoing or with respect to the enforcement of this Section 19.C, either directly or indirectly for itself, or through, on behalf of, or in conjunction with, any person, persons, or legal entity, own, maintain, operate, engage in, be employed by, or have any interest in any business using any aspect of the System, the overall Burros & Fries business concept, with similar Products and/or Services within a ten (10) mile radius of the Accepted Location designated hereunder, or within a ten (10) mile radius of any other System franchise or company-owned business in existence or planned as of the time of termination or expiration of this Agreement as identified in the Franchise Disclosure Document in effect as of the date of expiration or termination of this Agreement.

The unenforceability of all or part of this covenant not to compete in any jurisdiction will not affect the enforceability of this covenant not to compete in any other jurisdictions, or the enforceability of the remainder of this Agreement. This covenant not to compete is given in part in specific consideration for access to trade secrets provided as a part of our training or ongoing support programs. In any jurisdiction in which the covenant contained in this Section 19 or any part of it is deemed not enforceable in whole or in part, Franchisee hereby grants us an option to purchase Franchisee's Business on expiration or termination of this Agreement.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 51

Does the Burros Fries Franchise Agreement contain a liquidated damages clause, and are such clauses always enforceable under California Civil Code Section 1671?

Accepted Answer

## **IV. LIQUIDATED DAMAGES PROVISIONS**

The following states have statutes which restrict or prohibit the imposition of liquidated damages provisions:

CALIFORNIA Civil Code Section 1671

INDIANA IC 23.2-2.5-2 MINNESOTA Rule 2860.4400

![](_page_158_Picture_0.jpeg)

State courts also restrict the imposition of liquidated damages. The imposition of liquidated damages is also restricted by fair practice laws, contact law, and state and federal court decisions.

For franchises governed by the laws of the state of MINNESOTA, liquidated damage provisions are void.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 52

In the Burros Fries Franchise Agreement, if the Franchisee is a corporation or limited liability company, do certain provisions of the agreement apply to the shareholders, members, partners, or owners?

Accepted Answer

![](_page_59_Picture_0.jpeg)

## FRANCHISE AGREEMENT

## *PARTIES*

**THIS FRANCHISE AGREEMENT** ("Agreement") is made by and between Burros & Fries Franchise, Inc, a California corporation, hereinafter sometimes referred to as "Burros & Fries" or "Franchisor" and that party or parties described as the Franchisee in this Agreement and on the signature line, hereinafter known as "you" or "Franchisee." If the Franchisee is a corporation or limited liability company, partnership or other entity, certain provisions of this Agreement also apply to your shareholders, members, partners or owners. Any such entity may be referred to as an "Entity" and those who own the Entity may be referred to as "Owners." For ease of reference, Burros & Fries, Inc., will also be referred to as "we," "us" or "our" in this Agreement. The persons signing as Franchisee, Owners or Guarantors will also be referenced to herein individually as "you" or "yours" or collectively as "Franchisee." The parties hereto are entering into this Agreement to evidence the agreement and understanding between the parties as follows:

## *RECITALS*

**WHEREAS**, We have devised a uniform system for the establishment and operation of a Burros & Fries restaurant that serves a variety of sandwiches, plates and salads and beverages (such as carbonated drinks, juices, teas and bottled water) for lunch and dinner and made fresh daily using proprietary recipes with an operational emphasis on quality and superior service (the "System") either within a shopping center or free-standing structu

Source: Item 22 — CONTRACTS (FDD page 53)

Question 53

Does the Burros Fries Franchise Agreement require application of the law of California, and is this provision always enforceable under California law?

Accepted Answer

The Franchise Agreement requires application of the law of California. This provision may not be enforceable under California law.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 54

Does the Burros Fries franchise agreement require franchisees to post warnings about consuming raw or undercooked seafood?

Accepted Answer

Franchisee also acknowledges that its state or locality may require a posting in Franchisee's Business warning that consuming raw or undercooked seafood may increase the risk of food borne illnesses.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 55

For a Burros Fries franchise, is the franchisor's right of first refusal waived if they fail to exercise it on the initial offer, and the franchisee later changes the terms of the offer?

Accepted Answer

Failure of us to exercise the option afforded by this Section 22.C shall not constitute a waiver of any other provision of this Agreement, including all of the requirements of Section 22.B, with respect to a proposed transfer of any Interest. Any later change in the terms of any offer prior to closing shall constitute a new offer subject to the same rights of first refusal by us as in the case of an initial offer.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 56

For a Burros Fries franchise, can the requirement for the franchisee or owner to participate in the day-to-day operations during the first year be waived, and if so, under what condition?

Accepted Answer

Franchisee acknowledges that a Burros & Fries Business involves hard work and long hours. Franchisee acknowledges that we have not represented that this Business is going to be easy for Franchisee (or any of its Owners) and agrees to participate in the day-to-day operation of the Business. Unless otherwise approved in writing by us, Franchisee (or one of its Owners) is required to participate in the dayto-day operation of the Business for at least the first year of operation. After Franchisee's first year of operation, Franchisee (or one of its Owners) is not required to participate in the day-to-day operation, however Franchisee agrees that the Business must be at all times under the operation of a General Manager approved by us (as described in Section 12.F of this Agreement). Franchisee agrees that the General Manager will oversee the operations and supervise all Employees. The General Manager will also be responsible for providing continuing guidance, oversight, day-to-day management, oversee all food preparation, enforce service standards and properly process all paperwork, reports and complaints.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 57

Is a Burros Fries franchisee allowed to accept business from customers outside their territory?

Accepted Answer

If Franchisee is asked to conduct business at an off-site event (such as: community events, consumer shows, festivals, expos, etc.) or perform Services outside its Territory in which there is another franchise or company-owned business, Franchisee must immediately refer that request to the franchisee in that geographical area or directly to us. Franchisee must not conduct business at any off-site event or perform any Services outside its Territory if another franchise or company-owned business is operating in that area. If we (where there is a company-owned business) or the other franchise determines it is in the best interest of the person or business for Franchisee to conduct such off-site event or perform Services, then Franchise can immediately proceed. If there is not a Burros & Fries Business in that other area, then Franchisee can immediately conduct such off-site event and/or perform such Services, however Franchisee must be prepared to refer the off-site event or the person or business receiving Services to another franchisee when the unassigned area is purchased. We and other franchisees and company-owned businesses must refer off-site events, people and businesses that are within Franchisee's Territory to Franchisee and also reserve the same right to conduct off-site events and/or perform Services within Franchisee's Territory if it is determined, to be in the person's or businesses' best interest, by the franchisee of that territory.

If during the term of this Agreement, Franchisee is unable to promptly and properly provide Products or Services to any person or business due to excessive work or other cause; then Franchisee must immediately refer that person or business to another franchise, company-owned business or to us. Failure of Franchisee to: (i) refrain from Target Marketing and/or (ii) refer off-site events and/or person or businesses seeking Services as described herein, will result in us having the right to terminate this Agreement as specified in Section 23.C. For any default of this Agreement which triggers our ability to terminate, then as an alternative to termination, we will have the right, in our sole discretion, to modify or completely eliminate any rights Franchisee may have with respect to the protected area status of the Territory, effective ten (10) days after delivery of written notice to Franchisee.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 58

Is a Burros Fries franchisee allowed to service guests who come from outside their territory?

Accepted Answer

If you are provided with a Territory, you are encouraged to directly advertise and market for guests to serve approved menu items, sell retail items and offer catering services within your Territory. You may be able to perform catering services in other geographical areas outside your Territory away from your facility under certain circumstances (as further described below). If the other geographical areas are unassigned, we have the right to sell or assign it, or part of it, at any time, without notice to you and you might not have the right of first refusal or option to buy the territory that was formally unassigned. You may serve guests and sell retail items to anyone who comes from anywhere so long as all such items are being sold from your Business. We, other franchisees and companyowned businesses are subject to the same restrictions and reserve the same right to serve guests and sell retail items to anyone who comes from anywhere without compensation to you. You are prohibited from soliciting and marketing

Source: Item 12 — TERRITORY (FDD pages 38–40)

Question 59

Does a Burros Fries franchisee have to be in compliance with the terms of their existing franchise agreement to acquire an additional franchise?

Accepted Answer

You must submit a separate application for each Franchised Business to be established by you. You must pay the fee for each additional acquisition mentioned in Item 5 and be in compliance with all of the terms and conditions of your existing Franchise Agreement. We must approve the location of any additional Burros & Fries Businesses as mentioned in Items 11 and 12 above.

Source: Item 12 — TERRITORY (FDD pages 38–40)

Question 60

Is a Burros Fries franchisee eligible to renew their franchise agreement if they are in default under any agreement with the franchisor?

Accepted Answer

Franchisee shall have the option to renew this Agreement for up to two (2) additional terms of ten (10) years each, provided we are still offering franchises at that time, and further subject to the following conditions, all of which must be met prior to renewal:

- 1. Franchisee shall give us written notice of its election to renew not more that twelve (12) months and not less than six (6) months prior to the end of the then current term. We will respond to Franchisee's written notice to renew no later than thirty (30) days after receipt of such notice by email or any other form of written communication;
- 2. Franchisee must not be in default under any provision of the Agreement, any amendment hereof or successor hereto, or any other agreement between us and Franchisee, and

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Franchisee shall have complied with all the terms and conditions of all such agreements during the terms thereof;

Source: Item 22 — CONTRACTS (FDD page 53)

Question 61

Is a Burros Fries franchisee guaranteed the same protected area or Non-Traditional Location upon renewal?

Accepted Answer

Franchisee is not granted an exclusive territory. The Franchisee is granted a Territory that is a protected territory as defined in this Agreement. The location of the Franchise Business shall be as the parties agree, usually about a radius of three (3) miles. If the actual Franchise Business address has not yet been chosen by the time the parties sign the Franchise Agreement they shall agree upon a temporary territory. The final Territory will be defined from the actual Business address once chosen.

Source: Item 22 — CONTRACTS (FDD page 53)

Question 62

Can a Burros Fries franchisee perform catering services in other geographical areas outside their Territory?

Accepted Answer

If you are asked to conduct off-site events (such as: community events, consumer shows, festivals, expos, etc.) to promote your Business or provide catering services in another geographical area in which there is another franchisee or company-owned business you must immediately refer that request to the franchisee in that geographical area or directly to us. If the other franchisee or company-owned business determines it in the best interest for you to conduct such off-site event or perform such catering services, then you can immediately proceed. If there is not a Burros & Fries Business in that geographical area then you can immediately conduct such off-site event or perform catering services, however you must be prepared to refer such off-site event or catering business to another franchisee when that unassigned area is purchased. If during the term of the Franchise Agreement, you are unable to promptly and properly provide services and/or products due to excessive work or other cause then you must refer that person or business to another franchisee in the System or to us. For any default of the Franchise Agreement, as an alternative to terminate, we may modify or completely eliminate any rights that you may have with respect to the protected status of your Territory, effective ten (10) days after delivery of written notice to you. In addition, we may modify or eliminate completely, the Territory (Franchise Agreement Sections 6, 12.H and 23.F).

We encourage the owners of all Franchised Businesses to work out a referral relationship and advertising strategy or arrangement if they are within close proximity of each other (defined as being within a ten-mile radius of each other). We must be notified of all such arrangements.

Source: Item 12 — TERRITORY (FDD pages 38–40)

Question 63

Can a Burros Fries franchisee perform off-site events and catering services within their Territory?

Accepted Answer

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## ITEM 12 TERRITORY

You must operate your Business within the specific location identified in your Franchise Agreement. You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control. Subject to the prohibitions set forth in this Item 12, you may face competition from other franchisees and company-owned businesses we operate or from other channels of distribution or competitive brands that we control. You are awarded a protected territory ("Territory") that will include up to three (3) miles driven in any direction from the Franchise Business as defined by MapQuest or a similar mapping program, provided we reserve the right to grant a territory that is larger or smaller than this area described above, in order to account for more densely or sparsely populated areas and other factors. We will determine population based on the most recently published data from the U.S. Census Bureau (or such other source we may indicate to you). You may not conduct business out of any other location other than the accepted location that has been entered in your Franchise Agreement or made part of by an addendum attached to your Franchise Agreement. You may service guests and sell approved retail items to anyone who comes from anywhere so long as your sales do not result from any Target Marketing (as defined below) activities by you. However, you can perform off-site events (such as community events, consumer shows, festivals, expos, etc.) and catering services within your Territory. You may also be able to perform off-site events and/or catering services in geographic areas outside your Territory under certain circumstances (as described below). You may not relocate your Business without our written consent, which we will not unreasonably withhold or delay.

If you are provided with a Territory, we cannot establish either a company-owned business, franchise or license another to locate a Burros & Fries business within your Territory during the term of your Franchise Agreement.

Your licensed Territory is determined by population, business potential, traffic patterns, proximity to major roads, demographics of the surrounding area, available parking, market penetration or other conditions important to the successful operation of your Business, as we deem appropriate and as identified in your Franchise Agreement. Your licensed Territory is determined by us once a location is chosen, and will not be altered even if there is a population increase or decrease. It will also not be affected by your sales volume. In certain cases, if you are in default we may change your Territory. Certain locations, such as major metropolitan areas may have smaller territories of densely populated areas. We must have consented to the location for your Business within your defined Territory in writing before you open for operation.

You must submit a separate application for each Franchised Business to be established by you.

Source: Item 12 — TERRITORY (FDD pages 38–40)

Question 64

Can a Burros Fries franchisee provide services outside of their territory?

Accepted Answer

If Franchisee is asked to conduct business at an off-site event (such as: community events, consumer shows, festivals, expos, etc.) or perform Services outside its Territory in which there is another franchise or company-owned business, Franchisee must immediately refer that request to the franchisee in that geographical area or directly to us. Franchisee must not conduct business at any off-site event or perform any Services outside its Territory if another franchise or company-owned business is operating in that area. If we (where there is a company-owned business) or the other franchise determines it is in the best interest of the person or business for Franchisee to conduct such off-site event or perform Services, then Franchise can immediately proceed. If there is not a Burros & Fries Business in that other area, then Franchisee can immediately conduct such off-site event and/or perform such Services, however Franchisee must be prepared to refer the off-site event or the person or business receiving Services to another franchisee when the unassigned area is purchased. We and other franchisees and company-owned businesses must refer off-site events, people and businesses that are within Franchisee's Territory to Franchisee and also reserve the same right to conduct off-site events and/or perform Services within Franchisee's Territory if it is determined, to be in the person's or businesses' best interest, by the franchisee of that territory.

If during the term of this Agreement, Franchisee is unable to promptly and properly provide Products or Services to any person or business due to excessive work or other cause; then Franchisee must immediately refer that person or business to another franchise, company-owned business or to us. Failure of Franchisee to: (i) refrain from Target Marketing and/or (ii) refer off-site events and/or person or businesses seeking Services as described herein, will result in us having the right to terminate this Agreement as specified in Section 23.C. For any default of this Agreement which triggers our ability to terminate, then as an alternative to termination, we will have the right, in our sole discretion, to modify or completely eliminate any rights Franchisee may have with respect to the protected area status of the Territory, effective ten (10) days after delivery of written notice to Franchisee.

Source: Item 22 — CONTRACTS (FDD page 53)

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